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Momentum

Men’s Warehouse (MW - Snapshot Report)

 Company Description & Developments

The clothing company founded in Houston in 1973 has come a long way since its humble beginnings.  Although George Zimmer’s trademark motto hasn’t changed, (aside from his now distinctly scratchy voice) the company’s size, reach and profitability has soared.  So has its stock…

 In a world where competition for price and business is tough, Men’s Warehouse is not only guaranteeing “you’ll like the way you look” but they are honing in on a niche market that has become not only price sensitive, but more prudent and discerning in their purchases – The middle class.

Recently the company partnered with designer Vera Wang to design their new “Black” line of tuxedos, which is a move to increase visibility and bring a bit more class and high fashion to their already respectable lineup.    

Anecdotally, I have noticed new stores popping up in my travels which take me to several major cities a month.  Personally, I enjoy my experience there and believe that they sell quality threads at great prices.  Perhaps I am jaded being an old Wall Street guy who used to pay for custom suits (in my young and foolish days).

As America (supposedly) gets back to work, the male working populous will need some new duds to make an impression and MW should benefit from this as well.

* Here is a younger Zimmer offering us his promise in 1993

Financial Profile

MW is trading at about 15.4 times trailing earnings (p/e) and the Zacks Consensus Estimate is for that number to drop to 14.3 over the next year (with the price here).  Last year the company earned $2.24 and expectations are from those earnings to increase 3% to $2.31 for the current fiscal year.

They are ranked 5 out of 47 other companies in their industry, which is not a bad showing considering their peers.

Currently, MW is throwing off a dividend of .48, with a yield of 1.45%.  Obviously as a momentum stock we are looking for capital appreciation, but a bit of div love never hurts. 

Zacks currently ranks MW with an Outperform rating with a price target of $36.70. 

Earnings Estimates

Expectations are for MW to lose 0.12 cents this quarter when they report on March 7th, down from .79 in EPS they showed last quarter.  Following this quarter earnings are expected to move back up to .61. 

MW surprised analysts to the upside by 21.54% last quarter.  We have not seen any upward analyst revisions in the past 30 days for the coming report, but we are still almost two months away from the numbers.  What I have seen is upward yearly revisions from 2.20 to a current consensus estimate of 2.31 in earnings for this year. 

These revisions along with the fundamental and technical analysis gave me good reason to add it to our momentum list.

Market Performance & Techincals

MW is currently trading just about $4.00 below its 52 week high of $36.44.  Over the past year MW has outpaced the S&P 500 by 28% and in the past 3 months alone has gained 11.69% against the index.

Along with most of the market, the stock pulled back sharply to $24.60 in August, but then retested that level again in October before starting its current trek higher.

In the charts you’ll notice that we are in a stock ascending channel, but the stock has been consolidating a bit between $31.50 and $33.50.  Strong support comes at the $31.50 level.  Look for the breakout above the recent $34.00 highs for a run.

 

Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

 

 

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